Industrial Policy Archives - Thoughtful Journalism About Energy's Future

Opinion: Bulldozer or bystander? Canada’s stakes in the new global economy

Energi Staff — Tue, 23 Sep 2025 17:39:53 +0000

This article was published by Policy Options on Sept. 9, 2025.

Big changes are coming to the global economy and the stakes are high for Canada. Over many decades, we have built a successful, export-oriented economy where our largest-value goods exports are oil and gas, metals and minerals, and autos – all of which are primarily destined for the U.S. market.

But these sectors and our entire trading relationship with the United States face significant uncertainty over the next decades as the world undergoes a reordering of trade patterns and a realignment of markets in the face of the rise of artificial intelligence, a changing climate, the global energy transition and U.S. tariffs.

How Canada fares will depend largely on private companies. Those that anticipate, innovate, adapt and prepare will thrive, while those that stagnate will struggle.

Governments can help by encouraging choices that are in our collective national strategic interest. Industrial policy – where governments deliberately support certain economic activities and outcomes – is an increasingly important tool.

However, to achieve results and maintain public trust, industrial policy needs to be designed and executed using the highest standards of excellence. Fortunately, we have years of experience and a growing body of research to give us a better idea of what to do. That’s critical because for every success story, there is an example where industrial policy went wrong.

Significant structural change in the global economy

The rise of artificial intelligence will increasingly influence the global competitiveness of companies and countries. While there are growing opportunities in the development of AI products, the overall adoption of AI is equally important, including in stalwart Canadian economic sectors such as agriculture, oil and gas and auto manufacturing.

As Evan Solomon, Canada’s first minister of artificial intelligence and digital innovation, said at an event in Montreal this summer, “Countries that master AI will dominate the future. You’re either part of the bulldozer or you’re part of the road.”

IRPP study: How Industrial Policy Can Strengthen Canada’s Economy and Sovereignty

Only targeted industrial policy will fulfil Canada’s value-adding potential 

Industrial policy and Canada’s uncertain future

AI isn’t the only area where the global economy will face disruption. Climate change is set to play a growing role in supply chains and goods production. As drought, floods, fires and storms increase in frequency and intensity, companies will face growing challenges with their operations and with securing feedstocks, water and other supplies.

Forestry, pharmaceuticals, chemicals and mining top the list for exposure to physical climate risks. If the pace of action to reduce emissions doesn’t accelerate, losses could reach eight per cent of global GDP by 2050. Companies and countries with strong adaptation strategies will fare better than those that don’t.

The global energy transition also remains underway, despite backtracking in the U.S. While there is debate about the pace at which demand for fossil fuels will decline, there is general agreement on a downward trajectory over the rest of this century.

Change may not come with a gradual price decline as some are envisioning. Instead, it could involve an extended period of volatility with mismatches between supply and demand leading to sudden price spikes and crashes that disrupt oil and gas producers as well as consumers.

Clean energy and electric vehicles may also face periods of volatility as companies struggle to predict demand in an environment of shifting government policies.

The energy transition continues to drive change in other markets as well, such as growing demand for the critical minerals needed for batteries and renewable energy. Making the right bets with the right timing will be critical, given the role energy and mineral sectors play in our economy.

The cost of underinvestment

Understanding trends underway is one thing, but doing something about them is another. Unfortunately, Canada has lackluster private sector investment in critical areas, such as AI adoption, clean technology adoption, technology commercialization, adaptation to climate change and critical mineral development.

Without significant action, Canada could slip out of the Top 10 global economies and see a declining standard of living in the coming decades.

It would be easy to blame the private sector, but companies often have good reasons to delay investment. Those facing an uncertain trading relationship with the U.S. may be making the right call in putting off investments in automation or AI adoption. China’s dominance of critical mineral markets keeps prices too low or uncertain to spur major investments in mining or processing.

What can be done to overcome near-term barriers to private investments that are in Canada’s long-term national interest? That’s where smart industrial policy can play a key role.

Private investment in the national interest

Canadian governments are already actively using industrial policy to drive private investment toward certain activities, such as trade infrastructure, technology commercialization, critical mineral development or agricultural technology adoption.

The governments are using tools such as investment tax credits, targeted procurement, contracts for difference, offtake agreements, below-market loans and more. The goal is to reduce the barriers holding back private investment in strategic areas and to design a policy that works at the least cost to the taxpayer.

The use of industrial policy is likely to increase as governments seek to secure a foothold in new global markets, retain high-potential companies and improve lagging productivity. But given the stakes involved, it will be critical that governments do more to ensure they get industrial policy right.

Canadian governments could learn from Australia’s approach.

For example, when it introduced its critical minerals production tax incentive in 2024, the government published an impact analysis that analyzed the policy problem which the tax was aimed at solving; the barriers the private sector faced; the sufficiency of government intervention; and the need for additional government intervention, with a cost-benefit analysis of three policy options.

It also listed a series of success metrics to ensure that the policy has the intended long-term effect.

This type of analytical rigour and transparency could go a long way toward delivering industrial policy excellence and improving public confidence in the ability of Canadian governments to deliver results.

Choosing to be the bulldozer requires a smart strategy

Structural changes to the global economy are coming. If Canada wants to maintain its place as a Top 10 global economy, governments will need bold industrial policies that enable Canadian companies to seize opportunities.

But those policies need to be smart, with careful design and implementation that achieve results without breaking the bank. Now is not the time for big announcements with little follow-through. Canada needs thoughtful, deliberate policy interventions backed by analysis and skilled teams to ensure smooth implementation.

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Opinion: Industrial policy and Canada’s uncertain future

Energi Staff — Mon, 08 Sep 2025 19:05:53 +0000

This article was published by Policy Options on Sept. 5, 2025.

By Steve Lafleur

Donald Trump’s re-election as president of the United States has left our entire country in a state of flux. His tariffs on key Canadian exports have already resulted in people losing their jobs and businesses scrambling to find new markets. Entire industries are in doubt. The only certainty, as Prime Minister Mark Carney has said, is that the “old relationship we had with the United States, based on deepening integration of our economies and tight security and military co-operation, is over.”

While this doesn’t mean we need to throw out one of the world’s most productive trade relationships, we need to be able to succeed as a country independent of U.S. public policy. We have no idea what Trump’s plans are from one day to the next, so we must be prepared for a more uncertain future.

Canada at a crossroads

Given the deterioration not only in our trade relationship, but also in our security environment, we need to do big things — fast. Could a stronger role for Canadian industrial policy be part of the answer?

The Institute for Research on Public Policy consulted hundreds of people from academia, business, government, industry groups and non-profits as part of a multi-year research project on Canada’s future economic choices. A final report is to be released at a conference on Sept. 16 in Ottawa.

The institute ran four workshops, guided by a group of experts, across the country. During those conversations we heard potential ways industrial policy could be applied, as well as divided opinions about how much — if anything — governments ought to do to support or reshape parts of the economy.

To some, a more robust industrial policy represented an opportunity for Canada to play a leadership role in future industries. To others, it sounded like heavy-handed government intervention. There was considerable openness to using targeted government actions to address some public priorities that financial markets have little incentive to address, for example, ensuring that Canada has the domestic capacity to manufacture vaccines.

Industrial policy is a loaded term. It means many things to many people. Most broadly it means governments actively attempting to steer a portion of economic activity. That can range from small things like tax credits to bigger plans to promote a particular sector or region.

An IRPP event | Canada’s Next Economic Transformation: Industrial Policy in Tumultuous Times

Some would argue that industrial policy is a form of socialism. Financial Post editor Terence Corcoran refers to it as “industrial statism.” He equates all industrial policy with the Trump administration’s arbitrary attempts to coerce and forcibly take equity stakes in American companies. If one believes there is no legitimate role for the government in the economy, this makes sense. Of course, by that logic the oil sands — arguably Canada’s biggest industrial policy success story — are socialist to the core.

There is always some level of government intervention in the economy, whether it’s setting and enforcing intellectual property law or building infrastructure or funding research. It is certainly true that governments can go too far, which is why it is crucial to distinguish between seizing the means of production versus giving industries incentive to do things in the public interest.

Doing big things right

While we are now faced with needing to do big things fast to adapt, we need to do them right. Reducing reliance on the United States while boosting internal trade and diversifying our export markets requires more and better infrastructure, fewer internal trade barriers, more effective marketing of Canadian research and development, and deeper integration with other trading partners. There are businesses that would be eager to participate in this transformation, but the overarching goals are far beyond the means of individual companies. Governments need to make investments in training, education, research and infrastructure, but also, in some cases, help de-risk private investments. Building more manufacturing capacity isn’t cheap, for instance, but it may be necessary in a world with thicker borders.

But big things tend to happen slowly — especially with major infrastructure projects that are often rife with delays and cost overruns. Canada’s many interminable transit projects are one example. Some might lament we can’t build big things anymore like the railway that tied the country together. But construction of that “ribbon of steel” came at a terrible price for workers who were treated as disposable and for Indigenous communities along the route. We would never think to build like that again. Nor should we. We can’t steamroll over communities or exploit labourers. We need to work in genuine partnership with Indigenous Peoples, and ensure that we don’t sacrifice safety or the environment.

Governments often do industrial policy badly. Everyone has a favourite example. That isn’t necessarily an argument against such policy. There are some public priorities that the private sector won’t address. The question isn’t whether governments are able to outsmart the market, but whether they can give companies reasons to contribute toward those priorities.

Getting industrial policy right isn’t a science. It’s also inherently prone to failure. Governments will make a lot of mistakes when stepping in where markets won’t. The key is learning from those mistakes and using those lessons in future decisions. One thing heard time and time again at the workshops was that we have often failed on that front, because there aren’t any rules to ensure that we examine failures rather than simply move on.

A three-legged stool

To get it right, governments should think of industrial policy as a three-legged stool. The legs are sound strategy, rigorous evaluation and good governance.

Sound strategy sounds easy, but is perhaps the least straightforward. Setting priorities isn’t easy, particularly when attempting to steer cutting-edge technologies that might not work out or when other countries might beat us to the punch. Rather than considering industrial policy as an investment in economic growth, Canada should primarily view it as a means to address pressing public priorities that private companies lack the incentive or capacity to address. The economic growth prospects should be viewed as a secondary benefit.

Rigorous evaluation is in some ways simpler. It’s routine to collect data and evaluate results. The trouble is inconsistency in assessing industrial policy initiatives. Governments would rather quietly roll up failed programs than learn from failure. In some cases, this leads to repeating the same mistakes. More consistent evaluation isn’t just about accountability. It’s hard to establish best practices without incorporating lessons from trial and error.

Finally, there’s governance. Managing industrial policy can be challenging, given that multiple departments or levels of government can be involved. Achieving a particular goal might require the federal government to co-ordinate with universities and colleges (provincial) and local infrastructure (municipal), while tapping several areas of federal responsibility.

This is where arm’s-length institutions can be beneficial. Entities that are nimble and insulated from day-to-day political influence, such as well-structured Crown corporations, can oversee projects that require governments, departments and external stakeholders to work together. One example is the expansion of the Trans Mountain pipeline. The project was at an impasse when Kinder Morgan decided it was no longer viable due to regulatory challenges and public pushback. The federal government determined the project was in the national interest, bought the pipeline and created Trans Mountain Corp. to complete the expansion, although at a far higher cost than anticipated. Nevertheless, the government set a priority and reached its goal through a targeted economic intervention.

Industrial policy for a changed world

Whether one likes industrial policy in concept, it’s something that governments use all the time. We can debate its merits, but it would be more productive to discuss how to get it right. That’s particularly important in an era in which we need to adapt to a global energy transition, geopolitical conflict and uncertain supply chains.

The COVID-19 pandemic and the Russian invasion of Ukraine caused many to recognize that seamless global economic integration can come to a halt with a single bullet or virus. We can no longer assume that we are immune to international conflicts.

National security and trade diversification have taken centre stage in industrial policy conversations. But that doesn’t mean the priorities identified before the trade dispute are irrelevant. There is still an ongoing energy transition as well as a housing crisis. Many Indigenous and remote communities continue to be left behind. Existing industrial policies can still be improved upon. We need to make big bets. Some are likely to fail, but with the right strategy and sound mechanisms, some may succeed. We can’t afford not to take chances while dealing with so many interlocking crises at once.

The world has changed dramatically since the IRPP’s project was conceived. And many more, darker changes could be afoot if the geopolitical winds blow the wrong way. Canada needs to be resilient to those changes and take control of our own destiny. Industrial policy can be part of that.

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Canada’s EV sales defy slowdown narrative, but supply chain challenges loom

Energi Staff — Tue, 04 Feb 2025 19:16:34 +0000

This article was published by The Energy Mix on Feb. 4, 2025.

By Christopher Bonasia

Canada’s electric vehicle sales continue to climb despite reports of slowing growth in the sector, but supply chain bottlenecks could affect the country’s long-term manufacturing ambitions.

Zero-emissions vehicles (ZEV) adoption hit an all-time high in Canada toward the end of last year, making up 16.5 per cent of all new vehicle registrations in the third quarter. The sector is expected to continue growing, even though it took a slight hit after the federal government paused its iZEV incentive program, experts say.

“The recent end to federal EV rebates is likely to slow down adoption in 2025 compared to our earlier forecast,” Aleksandra O’Donovan, head of electrified transport at BloombergNEF, told The Energy Mix.

BloombergNEF has yet to update its 2025 forecast following the iZEV program’s suspension, but O’Donovan said the decision probably “shaved off some of the otherwise expected peak in EV sales.”

But even so, “beyond 2025, Canada’s zero emission vehicle mandates will keep the EV market growing, by pushing automakers to grow EV sales in the country and to introduce affordable EV models,” O’Donovan added.

Reports of an EV growth slump emerged in 2024 after several automakers and battery manufacturers scaled back production plans. But key to that framing is that growth had slowed—not stopped nor reversed. Global EV sales rose 25 per cent last year, with especially high growth in China, and less in Europe. Sales in the United States and Canada grew by 9 per cent, reports Barrons.

Sales growth was slower in 2024 than in previous years that saw increases of 103 per cent in 2021, 60 per cent in 2022, and 33 per cent in 2023. But this does not signal the demise of an all-electric vehicle future. Some analysts suggest the narrative deceivingly implies that consumer demand is waning, when the real barrier is a lack of affordable options. Automakers are able to squeeze more funding from governments by making the transition to electrified transport seem more difficult, reports the Toronto Star.

Still, steady EV growth is key to federal and provincial ambitions of building up Canada’s EV manufacturing supply chain. Lagging EV demand was cited as the reason battery manufacturer Umicore paused construction of a facility in Ontario. And in Quebec, where Northvolt says it is still moving forward with plans for a factory, the parent company in Sweden declared bankruptcy when battery demand didn’t meet expectations.

Battery manufacturers are impacted by the size of the EV market, but they are “generally experiencing market dynamics differently,” said BloombergNEF energy storage analyst Evelina Stoiko. Cases like Northvolt’s are not reflective of the entire industry, and even in that case there were other factors at play.

Several other battery and EV projects are in the works, after Canadian governments courted companies like Volkswagen and Honda with subsidies. Those offers include construction support funding, but also production subsidies linked to volume, which is tied to EV demand. Auto industry insiders are indicating that the final amounts for these subsidies will be less than expected due to “ headwinds in EV sales,” reports the Financial Post.

Amid these challenges, Canadian governments have raised about $100 billion in public and private investment for projects that build and expand the EV manufacturing sector. But many of the projects have not yet started, and only part of the $31-billion in support promised by federal lawmakers has been distributed as Prime Minister Justin Trudeau prepares to leave office in a few months—to potentially be replaced by a government that would undo those policies.

“We have reshaped the industrial landscape of this country,” Industry Minister François-Philippe Champagne told a Canadian Club luncheon last week. “I would wish that we don’t reverse that because I think that we have prepared Canada best for the 21st century.”

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China’s evolving footprint in global energy development finance

Energi Staff — Fri, 20 Dec 2024 19:00:24 +0000

This article was published by the International Energy Agency on Dec. 18, 2024.

By Haneul Kim, Energy Investment Analyst

Mapping the landscape of China’s global energy investments

China is a major force in global energy investment and finance, both domestically – where more than USD 800 billion is set to be invested in 2024 – and as a source of energy finance globally, particularly in developing countries. This commentary focuses on China’s external finance for energy projects through its Development Finance Institutions (DFIs), China Development Bank (CDB) and the Export – Import Bank of China (CHEXIM), which have made China the single largest official source of development finance.1

Historically, much of this external financing has been directed toward fossil fuel projects. However, recent trends point to a shift towards clean energy initiatives, reflecting broader changes in China’s energy and industrial strategies. At the 2024 G20 Leaders’ Summit, the address by President XI Jinping highlighted the importance of cooperation on clean energy as part of a broader agenda for development in the Global South, mentioning in this context the Roadmap to Increase Investment in Clean Energy in Developing Countries that was prepared under the Brazilian G20 presidency by the International Energy Agency. This roadmap highlights the need for a sixfold increase in clean energy investments in developing economies other than China by 2035, calling for tripling concessional finance and deploying innovative de-risking mechanisms to mobilize private capital.

This commentary explores these three areas in depth: the size of China’s DFI finance flows for energy projects and the balance between clean energy and fossil fuel investments in, the nature and concessionality of China’s support, and China’s shifting role in the global energy investment landscape. This data and analysis provide important context for any discussion of China’s role in global energy financing.2

Balancing investments in clean energy and fossil fuels

China’s financing of clean energy infrastructure and technology from 2013 to 2021 exceeds the total amount of support provided to fossil fuels. Nonetheless, among DFIs, China is the largest financier of fossil fuel projects, offering nearly four times as much financing as institutions outside of China. This means that any changes to its strategy stand to have a large impact on overall trends.

Notably, among clean energy investments in the 2013-to-2021 period, a sizeable portion went to the transport sector, mainly for building rail transportation, a crucial avenue to avoid transport emissions and improve energy efficiency (Rail is the most efficient form of transportation). CDB and CHEXIM alone disbursed nearly USD 60 billion to this sector, greater than the USD 55 billion offered by all other DFIs combined. However, if the end-use sectors like transport are excluded, then China’s financing for fossil fuels in the fuel supply and generation sectors has consistently exceeded clean energy financing by at least a factor of two. This stands out in contrast to other DFIs globally, which have directed over 80 per cent of their total energy financing toward clean energy over the same period.

However, another important element of context is the regional differences in clean energy and fossil fuel investment. In Africa and developing economies in Asia, regions that are impacted the most by a lack of energy access, China’s investments in clean energy far exceed fossil fuel investments, even excluding investments into transportation, with the highest amounts going to renewables and other clean power, as well as grids. However, in the case of Latin America, the Middle East and Eurasia, China’s investments in oil production and refining make up the overwhelming majority. These three regions are China’s largest suppliers of imported crude oil, an important component of China’s energy security.

An important milestone in China’s policy was reached in 2021, when President Xi Jinping announced that China would “increase support for other developing countries in developing green and low-carbon energy” and pledged not to build new coal-fired power projects abroad. This marked a significant shift in China’s overseas energy financing, although some coal plants already approved and in development have continued to progress in various countries.

Understanding the concessionality of Chinese financing

Almost 95 per cent of financing from CDB and CHEXIM for energy-related projects is non-concessional, according to the standards of Official Development Assistance (ODA) established by the OECD Development Assistance Committee (DAC). This means that certain loan arrangements from Chinese DFIs may be less attractive to borrowers than development assistance from DFIs outside of China based on their interest rates or the duration of the loans, among other factors.

However, while Chinese financing may be less or non-concessional under the metric of grant equivalence established under the ODA framework,3 there are several features that make CDB and CHEXIM an attractive source of finance for foreign borrowers. While Chinese loans might be classified as non-concessional by ODA standards, they provide substantial advantages to middle- and low-income countries, such as extended repayment terms. Approximately 96 per cent of the total debt owed to China is long-term, at an average interest rate of 3 per cent. 4

On top of the quantitative metrics, Chinese financing can be attractive for many recipient nations due to the relative ease of the transaction process. A prominent example is the Karot Hydropower Station project in Pakistan, a flagship of China’s Belt and Road Initiative (BRI). Even though it was the first project of its kind within the BRI framework and required a sizable investment of approximately USD 1.74 billion, the financing process for Karot was exceptionally swift, with loan agreements signed in November 2016 and financial closure by February 2017 – remarkably fast compared with comparable institutions, which take an average of 27 months in project preparation before a single dollar is disbursed. The project, which was supported by a consortium of lenders, including CDB and CHEXIM, also offered relatively low interest rates and flexible terms, including a 17-year repayment period with a six-year grace period.

China’s evolving role in energy development financing

After hitting a historic peak in 2016, China’s DFI financing in energy has steadily decreased. This has led to speculation that the era of China’s prolific official development finance in energy abroad may be coming to an end. However, several announcements and strategic shifts indicate signs of revitalization in China’s global financing efforts, reinforced by tangible financial pledges.

In October 2023, during the 3rd Belt and Road Forum for International Cooperation, President Xi outlined a continued focus on energy-related financing, allocating nearly USD 48 billion each to CDB and CHEXIM. These funds are intended for “small yet smart” and “small but beautiful” projects, reflecting a shift from large-scale infrastructure development . This strategic pivot addresses longstanding critiques of China’s lending practices, prioritising lower-risk projects with a stronger emphasis on clean energy and environmental sustainability. Additionally, China announced it would replenish the Silk Road Fund, the main investment platform for the BRI, with USD 11 billion in additional capital. In the recent 2024 Summit of the Forum on China-Africa Cooperation, the Chinese government also committed to providing around USD 51 billion in financial support to Africa over the next three years, including 30 clean energy projects.

However, unlike in previous years, when DFIs and state-owned enterprises spearheaded large infrastructure projects, these institutions are now ceding ground to state-owned commercial banks and private sector investors. This shift towards market-based loans reflects China’s evolving strategy of embracing more commercially-driven projects and reducing the role of concessional finance. While this approach can unlock greater capital flows for development, it also introduces new risks for recipient countries, such as higher interest rates and shorter repayment periods, potentially increasing financial risks for recipient countries and altering the nature of China’s influence in global development.

These trends make clear that China’s role in global energy financing remains significant, with its contributions shaping energy infrastructure across many emerging and developing economies. Continuing to engage with the country’s approach to financing is therefore crucial, requiring a nuanced understanding of both the evolving dynamics and their impact on the global energy landscape.

References

While China’s DFIs, such as the China Development Bank (CDB) and the Export – Import Bank of China (CHEXIM), are central to its energy financing strategy, they represent just part of a broader array of institutions involved in overseas lending. This includes policy banks, commercial banks, and non-financial enterprises, each contributing to China’s extensive global energy investments.
There is no definitive data set on China’s overseas financing due to the lack of official information. Various academic initiatives, such as the Global Chinese Development Finance Dataset by AidData, which was used for this particular commentary, offer different estimates. As these are based on investigative methods, they may not fully capture the true extent of China’s development financing. The Chinese Academy of Social Sciences has also acknowledged the challenges in accurately measuring these flows.
The grant equivalent of a loan is a measure used to assess the concessionality, or generosity, of the loan. It represents the financial benefit provided to the borrower compared to what they would have paid under market terms. Essentially, the grant equivalent is the portion of the loan that can be considered as a “gift” or subsidy, calculated based on factors like interest rates, grace periods, and repayment terms. To qualify as Official Development Assistance (ODA), at least 10-45 per cent of the amount provided should be a grant-equivalent, and the OECD Development Assistance Committee average between 2015 to 2021 was 52 per cent. In the case of China’s ODA-like loans to energy-related sectors, the average grant element from 2013 to 2021 was 33 per cent. This difference indicates that, on average, China’s loans are less concessional, meaning they provide a smaller financial benefit to the borrower compared to loans from OECD countries.
Based on calculations by the Chinese Academy of Social Sciences research paper 《生产性金融：中国海外贷款与发展中国家经济增长》。The financial terms are not limited to the energy sector only, but are estimated average interest rates calculated based on debt stock and interest payment data available in the World Bank’s International Debt Statistics database.

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Opinion: Battle of the giants: The EU and U.S. are concerned about China’s industrial overcapacity

Energi Staff — Tue, 01 Oct 2024 18:32:56 +0000

This article was published by The Conversation on Sept. 30, 2024.

By Yaxin Zhou

Long dubbed “the world’s factory,” China is no longer satisfied with exporting only low-end manufacturing products. With its exports of electric vehicles (EVs), solar panels and lithium batteries, China is now in the process of conquering the American and European green markets. This is why the European Union and the United States, in particular, have begun criticizing China for its “industrial overcapacity.”

China immediately retorted: “Globally, green capacity is not in excess, it is in short supply. The problem is not overcapacity but excessive anxiety.” But that doesn’t change the problem of Chinese overcapacity. So, beyond this rhetorical battle, what is it about China’s manufacturing industry that worries the European Union and the United States?

In my work as a doctoral candidate in political science at the Université de Montréal, I am studying the relationship between China and the countries of Southeast Asia and working on a comparison of the European Union (EU) and the Association of Southeast Asian Nations (ASEAN).

Abundant subsidies

In so far as it concerns Europeans and Americans, China’s overcapacity can be summed up by two main elements: massive Chinese government subsidies, and very small demand in the domestic market. These two factors mean that the supply stimulated by public funding in China far exceeds the demand of local markets. The result is that Chinese products are flooding international markets, where, with their very competitive prices, they threaten the survival of domestic manufacturers.

Chinese government subsidies are particularly prevalent throughout the green production chain. China’s strategy includes cheap loans, low-cost access to land, huge investments in infrastructure and consumer premiums. Chinese subsidies in the green industry are three to nine times higher than those of countries in the Organization for Economic Co-operation and Development (OECD).

By 2023, China will control an average of 71 per cent of global production in the EV, solar panel and lithium battery industries (EV 60 per cent, solar panels 80 per cent and lithium batteries 74 per cent) and on average accounts for 66 per cent of global sales (EV 60 per cent, solar panels 80 per cent and lithium batteries 60 per cent).

However, these figures need to be taken with a grain of salt. Although China is now the world’s largest producer and seller of green products, the domestic Chinese market accounts for the lion’s share of consumption: almost 90 per cent of Chinese production of EVs and lithium batteries, and 60 per cent of solar panels, according to the China Chamber of Commerce report for the import and export of machinery and electronic products.

State funding also means that, for the same model, the price of an EV sold in China is half that on the European market. Funding aside, Chinese EVs cost almost as much as European EVs to produce. And European EVs still account for the lion’s share of the European market.

A change on the horizon?

However, a recent factor could change things. The Chinese government ended all subsidies for solar panels and EVs at the end of 2022. This could have a negative impact on the domestic market and lead to even greater exports to the international market.

So the EU was right to sanction Chinese EVs. However, Chinese companies will very likely find ways to get around the sanctions. For example, they could team up with European manufacturers. This is the case for XPeng Motors and Leapmotor, two Chinese groups that in 2024 signed collaboration agreements, respectively, with Volkswagen and Stellantis, the two leading EV manufacturers in Europe.

Factory of the world, top-of-the-range version?

The problem Chinese industry represents in the eyes of its economic competitors is not so much its “overcapacity” in terms of production, but rather the change in its economic model, which is now focusing on top-of-the-range products with its famous “made in China 2025” project. In less than 20 years, this paradigm shift resulted in the rise of a Chinese green industry before Western governments had time to prepare for it.

When China joined the World Trade Organization (WTO) in 2001, the Western market was in for an initial shock. Originally, the famous “made in China” label was almost a joke, given the poor quality of the products, but since then, low prices for Chinese goods have turned out to be a tenacious strategy.

The second shock has just begun, and is likely to have far more severe consequences than the first. This time, China has an exceptional combination of four strengths; (1) It accounts for 30 per cent of global manufacturing; (2) its labour force remains relatively cheap; (3) it has advanced technological capabilities; (4) its state subsidies are abundant.

So the challenge posed by China to the Western green industry is significant. In addition to state subsidies and China’s “industrial overcapacity,” the comparative advantages of Chinese companies in this industry also play a part.

Take the example of the EV, where 30-40 per cent of the price comes from the battery. BYD, the largest EV manufacturer in China, is almost self-sufficient throughout the production chain, since it produces not only most of the car’s critical parts, but above all, its battery.

After the sanctions, a better future for local manufacturers?

Green industry is the key to achieving climate goals. However, it is not always easy to convince stakeholders to change their orientation, especially when the cost of the transition is significant.

Europe and the United States are right in accusing China of providing massive subsidies. However, for a new industry to prosper and win its market share in increasingly fierce global competition, closing its market to external competition is only the first step.

Europe and the United States must review their industrial policies, and the state must intervene where and how it can.

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Union leaders urge federal gov’t to seize “the opportunity of the century” to create jobs in Alberta

Energi Staff — Wed, 08 Feb 2023 20:38:52 +0000

EDMONTON – A group of six Alberta union leaders representing workers in energy, construction and manufacturing are urging federal Finance Minister Chrystia Freeland to help Alberta “seize the opportunity of the century” to attract investment and create jobs.

These leaders are calling for the Canadian government to make the upcoming federal budget a definitive response to the American Inflation Reduction Act, which is funding aggressive programs in the United States to, among other goals, invest in domestic energy production and promote clean energy.

“Our American allies have responded to this shift by earmarking $738 billion to support an industrial policy that will pivot the American economy and position American workers for increased prosperity in a world that’s changing fast,” the six write in a letter to Minister Freeland.

In the letter, Alberta Federation of Labour president Gil McGowan and five other Alberta union leaders, ask Minister Freeland “to match the scale, scope and ambition of the American IRA.” The six leaders argue that if the feds ignore the challenge, “we’re worried that our country and our citizens will be left behind.”

McGowan and the other union leaders argue that the world is experiencing the biggest economic paradigm shift since the Industrial Revolution. They add this transition “represents the opportunity of the century to attract investment and create jobs.”

In the letter, the union leaders say that Alberta has “certain politically-motivated groups and individuals in our province” who are wrong. According to the correspondence, these groups share a fearful message with Albertans, and argue that preparing for change will somehow hurt our economy or destroy our oil and gas industry.

“We are convinced that if the federal and Alberta governments embrace the kind of industrial-policy approach being advocated by both the Alberta labour movement and the Alberta business community, the issue won’t be job losses; instead, the real problem will be finding, training and mobilizing enough workers to get all of the work done.”

The labour leaders say that their biggest fear of not adopting a strong industrial policy is “that our province and our country will miss out on the historic and unprecedented opportunities for job creation and broadly-shared prosperity that are inherent in the unfolding global energy transition.”

The letter concludes by urging Minister Freeland to ignore the actors on Alberta’s political stage “who are trying to spread fear, rather than nurture hope and confidence.”

“That shouldn’t stop you and your cabinet colleagues from proceeding with the federal portion of a Lougheed and IRA-style industrial policy. Obviously, such a policy will not be able to live up to its full potential without the participation of the Alberta government. But by putting serious money on the table – with strings attached to ensure that the desired investments are good for both Alberta workers and Alberta communities – you will be showing good faith and commitment. That will make it easier (and more likely) for the Alberta government, led by whoever wins the upcoming election, to respond in kind.”

The letter was signed by Gil McGowan, President of the Alberta Federation of Labour; Keith Stevenson, Business Manager/FST Ironworkers Local 720; Gavin McGarrigle, Western Regional Director Unifor; Scott Lunny Director, District 3 United Steel Workers; Chris Flett Business Manager, IUOE Local 955; and Michael A. Reinhart Business Manager/ Financial Secretary, IBEW Local 424.

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